Eskom plan to recoup R1bn short-circuited
• Asset Forfeiture Unit pulls the rug from underneath the financially struggling power utility
Eskom would already have the R1bn it paid to McKinsey for its controversial consulting work back by now were it not for the Asset Forfeiture Unit, which threw a spanner in the works at the last minute.
Eskom would already have back the R1bn it paid to McKinsey for its controversial consulting work were it not for the Asset Forfeiture Unit (AFU), which threw a spanner in the works at the last minute.
The R1bn was part payment for a R1.5bn consulting contract in which Gupta-linked firm Trillian was a partner to McKinsey in 2016 and 2017. However, Eskom did not have the permission it needed from the Treasury to sign the contract.
McKinsey agreed last October to return the money to Eskom. Trillian, which was paid R500m, has said it will not.
Just as McKinsey, Eskom and the AFU — which also staked a claim to the money — were on the brink of a settlement in May that would have seen the money immediately returned to Eskom, the AFU pulled out and launched an application for the money to be forfeited to the state.
Eskom, which is in a precarious financial position and is unable to fully fund operations from its revenue, “was keen to have the funds promised by McKinsey returned to it as soon as possible”, said a company representative on Sunday.
Eskom confirmed it had been an active participant in negotiations with McKinsey and the National Directorate of Public Prosecutions, under which the AFU falls, until May 22. The agreement entailed that Eskom and McKinsey would tear up their contract and McKinsey would return the money. As the AFU already had a preservation order over the R1bn in place, it was agreed Eskom would cover the costs incurred by the AFU, which had appointed a curator as custodian of the money.
But on the day the agreement was to be made an order of the court, the AFU failed to turn up and the settlement did not go ahead. A day later, the AFU launched its own forfeiture application.
The AFU did not answer questions from Business Day on its decision.
In its application, filed on May 23, the head of the unit, Knorx Molelle, said the negotiations had been extensive but they “had reached an impasse”. Molelle also said in his affidavit it was the intention of the unit to return the money to Eskom once it had been forfeited.
But McKinsey says it will oppose the forfeiture, raising the possibility of a drawn-out legal process. To successfully persuade the court that the money should be forfeited, the AFU needs to persuade it that the money is proceeds of a crime. Although the contract was unlawful, it has not been proved that a crime was committed.
McKinsey will oppose any court process implying admission or a finding it received the money via criminal activity.
A McKinsey spokeswoman said: “We will repay Eskom what they paid us, as soon as possible. We need a court-endorsed process the public can have full confidence in.”
The company expected its dispute with the AFU to still be settled amicably.
Eskom, which launched its own court application in March to have all the funds paid to McKinsey and Trillian returned to it, said it intended to continue its litigation. But it indicated a settlement would be preferable.
The AFU had indicated that it did not intend to pursue Trillian for the fees it received as part of the contract as it believed these were not recoverable.